Generics take toll on Bristol-Myers' profit

Company raises forecast but says job cuts on the horizon

ValBrickates Kennedy

BOSTON (MarketWatch) -- Bristol-Myers Squibb Co. on Thursday reported 5.8% higher second-quarter earnings, but revenue was flat due to competitive pressure from generics on two key products, Pravachol and Plavix.

Despite the competitive pressure, the New York drugmaker
BMY, +0.91%
raised its 2007 financial forecast, citing anticipated strong sales for some newer products as well as continued emphasis on cost controls and a gain expected from the sale of certain assets.

The proposed cost controls "will include workforce reductions in some areas and the rationalization of some facilities," Chief Executive James Cornelius said in a statement.

"We believe that our specialty pharmaceuticals focus, our growing investment in biologics and commitment to reducing our cost base will drive sales and earnings growth in the years ahead, and the strength of our business will help support the dividend," Cornelius added.

He did not elaborate on the planned cuts during a conference call with analysts Thursday. Executives said they plan to give details on their cost-reduction plans at a meeting with investors Dec. 5.

Early Thursday, Bristol-Myers posted earnings of $706 million, or 36 cents a share, compared with $667 million, or 34 cents, in the year-earlier period. Excluding special items, Bristol-Myers earned 37 cents a share.

Revenue edged up 1% to $4.93 billion.

The results were largely in line with expectations. A poll of analysts by Thomson Financial pegged Bristol-Myers' average earnings per share at 36 cents, on revenue of $4.94 billion.

Bristol-Myers' top line has been under pressure in recent quarters, due to the loss of patent protection for its once-hot cholesterol drug Pravachol and to the brief introduction of generic competition for the blood-thinner Plavix, its top-selling product, in August 2006.

In a broadly weaker market, shares of Bristol-Myers lost more than 3% at their intraday low.

Mixed bag for sales

Quarterly sales of Plavix, co-marketed with Sanofi-Aventis,
SNY, +1.36%
came in at $1.19 billion, up 4%, as the drugmaker said sales continue to feel fallout from the introduction of a generic version by Apotex Inc. last summer.

According to a recent note by analysts at A.G. Edwards, Plavix sales were expected to total $1.1 billion.

Sales of Pravachol, which lost its patent protection last year, plunged 59% to $132 million.

Also falling were sales of Erbitux, a colorectal-cancer drug co-marketed by Bristol-Myers with ImClone Systems
IMCL, +51.20%
The drugmaker said Erbitux sales declined 6% to $162 million due to increased competition.

Awaiting a Plavix recovery

Looking forward, Bristol-Myers said it now sees 2007 earnings per share coming in at $1.35 to $1.45, up from its previously targeted range of $1.24 to $1.34.

The drugmaker said it was raising its forecast because of strong sales for various key products and the expected gain on the sale of certain product assets.

On a call with analysts Thursday, Bristol-Myers executives said they see 2007 sales growing in the mid-to-high single digits.

Last summer, Canada's Apotex put out a generic version of Plavix, essentially crushing the market for branded Plavix for the remainder of 2006 and into early 2007. A federal court later demanded that Apotex cease shipment of the product.

Bristol-Myers has said it expects Plavix sales to pick up once the cheaper generic product has worked its way through the market.

In June, a federal court also found that Apotex's product violated a key Sanofi-Aventis patent protecting Plavix, and thereby affirmed Plavix's patent exclusivity until November 2011. Apotex plans to appeal the ruling.

Last February, Sanofi-Aventis reportedly approached Bristol-Myers about a possible takeover, but the two companies were unable to agree on an acquisition price.

On the call with investors, Cornelius refused to comment on any takeover speculation.

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